Tag: Capital Expenditure 

Expenditure on improvement rather than repair. Where expenditure is more closely connected with the business income-earning structure than its income earning capacity, it is capital expenditure.

India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012

India vs ST Microelectronics Pvt. Ltd., September 2020, Income Tax Tribunal, ITA No.6169/Del./2012

/ Administrative Tribunal, Arm's length principle, Benchmark, Benchmark, Range and Median, Capital Expenditure , Comparability, Comparability Analysis, Comparability factors, Decision in favor of taxpayer, India, Most appropriate method (MAM), Services and Fees, Software development services, Software services, Training workforce, Transactional net margin method (TNMM), Transfer Pricing Methods, Working capital adjustment
ST Microelectronics Pvt. Ltd. is a subsidiary of ST Microelectronics Pte. Ltd. which in turn is a wholly owned subsidiary of ST Microelectronics NV, Netherlands. ST Microelectronics Pvt. Ltd. is into the business of Integrated Circuit Design, CAD Tools and software development for its overseas group concerns. It also provides marketing support services to a group company and software development services related to design implementation and maintenance with respect to Integrated Circuits as required by guidelines/instructions. During the year under assessment, the taxpayer entered into various transactions with its Associated Enterprises. In order to benchmark its international transactions qua provision of software development services and qua provision of marketing support services ST Microelectronics used Transactional Net Margin Method (TNMM) with Operating Profit/Operating Cost as the Profit Level Indicator (PLI) being the Most Appropriate Method (MAM), computed its own margin at 11.11% as against weighted average arithmetic mean margin of 19 comparables at 11.31% and found its international transactions at arm’s ... Read more